I would like to keep GST simple and the same on everything. However, travelling a lot in Australia as I do (4 mos a year) I admit that the computer systems make it easy. At the IGA I shop at while house sitting in Maleny, Qld, the computer not only puts GST on the things the Government decided should have GST, but it gives me a 3 cent "plastic bag reward" for every plastic bag I don't use since I bring my own reusable bags!

Buggered if I know how banks and real estate (are there others?) escaped GST other than voices in high places. But I ask myself: would Labour introduce a capital grains tax?

Buggered if I know how banks and real estate agents escaped GST other than voices in high places. But I ask myself: would Labour introduce a capital grains tax?

I'd imagine if every time you sold your house you had to hand over 10/12.5/15% to the government of your sale price, on top of the $15 - $30 grand to your real estate agent, house sales would head towards the floor. Same thing with banks, you'll kill the flow of money.

If there was a tax on selling houses it should be set low, like 1%, or put only on the capital gains.

If there was a tax on selling houses it should be set low, like 1%, or put only on the capital gains.

The Aussies still have stamp duty (even on car sales as well as houses I think), which is part of the complex array of taxes over here. I'm not implying anything about whether I think a particular tax is good or bad. I just like simple implementations which flow from simple regulations.

I'd imagine if every time you sold your house you had to hand over 10/12.5/15% to the government of your sale price, on top of the $15 - $30 grand to your real estate agent, house sales would head towards the floor.

Which the Government does seem to want to do sometimes when they think there is a housing bubble and inflation is too high. But the GST as currently constituted would only be on new houses, not used ones. GST costs are already reflected in materials to make new houses.

Same thing with banks, you'll kill the flow of money.

We prefer to leave that to the wizards of Wall Street themselves. (wink)

The trouble with reducing the tax on "healthy food" is that different people can have very different dietary requirements so what is a healthy food for me may be a bad choice for my elderly father or your toddler. What percentage of the population does a food need to be a good choice for before it gets the tick? Does something have to be 'the best' or merely adequate to be exempt?

The trouble with reducing the tax on "healthy food" is that different people can have very different dietary requirements so what is a healthy food for me may be a bad choice for my elderly father or your toddler.

True, but while the nutritional benefits of fruit & veg may be disputed to some extent, they're all food and none of it is bad for you (unless you count things like rhubarb leaves, which preumably aren't sold as food). Whereas bread, dairy and meat may all be healthy parts of a balanced diet, they can all cause problems in excess. What's more, each is part of a continuum:

So, if you want to expand it to other foods, there are whole new cans of worms (which are processed & thus bad) to deal with, whereas if you stick with something as simple as "fresh fruit & veg" then you may miss out on some healthy food but you wouldn't be able to argue with anything included under that.

Hmmm, the fundy married father of two from Papakura who I work with just switched his vote back to Labour over this.

The thing that has struck me about this debate though is how BRAINWASHED by neo-liberal orthodoxy large parts of the population has become, where the efficiency of the tax system and purity of the economic model is now the dominant consideration in thinking about taxation.

If it contains the seed it is a fruit like tomatoes, peas, peanuts.If it is the other parts that you eat its a vegetable. Potatoes?

Tom: I still think a little greater income tax would help more in Education, Health, Security. A survey a year or so ago showed a significant proportion of the population agreed with this. But like Law and Order its a difficult thing to sell moderation.

I totally oppose the idea of this exemption. The simplicity isn't just for purposes of economic purity, it also comes with a massive reduction in compliance costs. I say this as someone who was a programmer in a financial institution in Australia at the time that they introduced GST. It was a bigger project than Y2K. The cost of implementing a database lookup with a bunch of complex rules on top is orders of magnitude more than "multiply by x rate". There's millions of person-hours involved in fixing every single place GST is calculated in every piece of code written in this country. The real winners from such an idea would be accountants and accountancy programmers.

Promoting healthy food is a good idea but fucking up the taxation system so so that every system developer responsible for every system existing in NZ has to take account of this pissly rule, whether they're involved in the food business or not, is insane. Far better would just be for the government to subsidize fresh food if that's what they want people to eat. Or even better, just give more money to the poor people who might buy less fresh when it's a couple of % dearer. Or something.

As for the existing exemptions on financial instruments, they mostly make sense when you get right down to them. The financial system doesn't really deal in goods and services (and where they do, those things are subject to GST). For example, if I put money in the bank, you could call that a transaction, it's loaning the bank money. So you could argue that the government should get 15% of that. On top of the income tax they've already charged before I even got the money, and the income tax they will charge on the interest I receive, there would be no incentive whatsoever to put money in a bank. Nor would there be much incentive to borrow money either if it came at an instant 15% loss (on top of the interest you already lose). So there would be no banks. That's a pretty big change, brave would be the Minister of Finance who suggested that. If 15% GST were charged across the board on financial exchanges in NZ, the economy would grind to a halt within a few hours of the idea even looking like it might pass to law.

Ben, bollox. You could replace all the relevant IT systems in the NZ grocery industry for a few tens of millions, which is a fraction of the saving to the public. If the systems had been built to support change in the first place, which granted they probably haven't been, the cost would be negligible.

Depending on the exact GST rules, small greengrocers and farmers would have their compliance costs substantially reduced as they'd no longer need to account for GST at all.

Clarification. When I first mentioned real estate I was thinking of rents. I think rents are exempt. Is that true? If so, it does seem to make an interesting case of an exemption. In the bill (or the commentary when it was first introduced) it might say why.

Yes if you have bought a house since GST came in, it will have had GST reflected in the price. With the exception of a few "home builders" who are outside the system and pretending to not be a business, GST is in there. For those who are pretending to not be a business GST is in materials and subcontracting. Higher prices for new houses flowed through into the used house market.

BenWilson: we are on the same track. Simplicity of implementation (compliance costs) is important. Especially when you are using volunteer tax collectors (eg businesses).

But you know Economists. Having to fix every piece of code where GST is calculated (and lookup tables) increases the GDP (same as pollution). That's why I try and take a broader approach. (wink).

As to financials being exempt, yes if you add GST to them and change nothing else about the tax system then this results in a nonsense. That's why you can't discuss any one tax change in isolation. But we can once again look to Australia for information on where not to go. When Howard brought in GST he promised that many of the other taxes would be dropped. They weren't. Or do you remember a few which were dropped?

It's nice to see some discussion on NZ tax and public policy since I've had to endure such a lot of "he said" "she said" things about tax (never mind forming Governments) while I've been over here. Adding to Lange's original quip: At least New Zealand isn't just a large [Chinese] quarry.

I think Ben is over-egging it a little too. The current system is nice and simple but if that argument is the only important thing, why not bring in a flat tax for income tax? The "fresh produce" test is a relatively simple one.

But, Rich, do you really expect to see many businesses becoming exempt from GST? I don't know any shops that dont sell a bunch of eggs or chocolate bars along with their veg.

The trouble with reducing the tax on "healthy food" is that different people can have very different dietary requirements so what is a healthy food for me may be a bad choice for my elderly father or your toddler. What percentage of the population does a food need to be a good choice for before it gets the tick? Does something have to be 'the best' or merely adequate to be exempt?

As far as 'healthy' foods go, requirements are pretty much the same for people at all stages of life, the healthiness is more about the appropriate quantities for people at different life stages - eg older people may have slightly higher protein requirements than a middle aged person (unless you're talking about food allergies/intolerances, or a few items such as reduced fat dairy products for under 2's for example.

Watching TV3 news last night, did the reporter not claim Labour believes reduced GST income would be 'paid for by savings made in the health system'? What savings would these be exactly? Either that's bad reporting, or all I can say is, good luck with that.

Removing GST from fresh fruit and vegetables would cost $250-$270m, he said.

"Getting the price of cigarettes up has brought in about $200m ... that's pretty much a wash."

A wash is not processing, right?

Excuse my cynicism, but 'punt' seems an apt description. The likelihood of Progressive et al passing on the savings seems very slim too. Given some believe they already put 500% markup on some produce, really can't see them coming over all altruistic all of a suddden.

How many of the GST exempt status' in Europe etc where implemented retrospectively? That would be interesting to know.

Sorry if this has been covered anywhere else. Came in late, and read through post and first three pages as 'efficiently' as possible.